U.S. Base Oil Price Report


There was limited action in the U.S. base oil market as year-end vacations and holiday festivities were well underway. Posted prices held unchanged despite crude values picking up strength during the past week.

Base oils producers have bemoaned rising upstream costs as they have put a lot of pressure on profit margins since August.

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Producers last pushed up postings in early July, but have not attempted another price hike proposal since. The exceptions were Valero and Calumet, who stepped out with 25 to 30 cents per gallon increases in early November.

However, shortly following the initiative Valero alerted its customers that the Nov. 2 posting hikes were no longer in effect. The company chopped all neutrals grades by 30 cents per gallon while decreasing its bright stock posted price by 25 cents/gal, returning to October levels effective Nov. 11.

In a similar vein, Calumet lowered its line-up of paraffinic posted prices, reducing all grades by 30 cents/gal to return to October levels effective Nov. 19.

Both companies said the decrease in postings was due to generally weak market conditions at the time.

Meanwhile, crude oil values began December near the $78 per barrel mark, but soon thereafter starting to lose upward momentum, dipping back to around $69/bbl. But by mid month, oil prices started to recover, climbing back into the $72 to $74/bbl region in recent days trade.

On Tuesday, several OPEC ministers said they would hold output quotas unchanged. But the oil cartel called for greater compliance from some other members whose overproduction could thwart efforts to support current oil price ideas, particularly in the face of a fragile global economic recovery.

One OPEC minister stressed that the group, which supplies more than a third of the world’s crude, was unhappy with how some members have exceeded their production limits. The minister went on to say, “Yes, we are talking about compliance…we are calling for member compliance.”

The decision to keep production output unchanged reflected the producer group’s cautious approach to balancing the market this year. In the end, the 12-member Organization of the Petroleum Exporting Countries decided that no action was the best action in a market where the pace of the world’s recovery from its worst recession in decades remains uncertain.

A pressing concern has been the pace of the world’s economic recovery. OPEC has described 2009 as one of the worst years for oil demand. While the group recently revised its forecast slightly upward for 2010, it said that demand will be weak until the second half of the year.

At the close of the Tuesday, Dec. 22, NYMEX session, front month light sweet crude oil futures ended the day at $74.40 per barrel, a gain of $3.71 from the week earlier settlement at $70.69/bbl.

Carolyn L. Green, based in Houston, can be reached directly at carolynlgreen@gmail.com.

Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.

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